The war in Ukraine is keeping oil markets on edge as talks on a nuclear deal with Iran stalled.
Elizabeth Lowe and Alex Longley Bloomberg
Created March 11, 2022 March 11, 2022
Brent crude faltered at the end of a volatile week as Russia’s war in Ukraine kept markets on edge and Iran nuclear deal talks stalled.
London futures added 0.7% on Friday, the smallest move in a week with the biggest swings on record. West Texas Intermediate’s trading range was the widest since it turned negative in 2020.
Oil has risen in price since negotiations on the Iranian nuclear program were halted in Vienna, with no indication of when they will resume or if they will be resumed. Earlier, prices fell as President Vladimir Putin noted “positive progress” in talks with Ukraine.
This week, the market was rocked by news of a US ban on Russian oil imports and what appeared to be signs of OPEC+ disunity. There are still signs that Russian oil is being shunned more widely as there are no buyers in a recent tender for oil from the country’s Far East.
The effects of the war affected commodity markets from wheat to basic fuels such as gasoline and diesel, leading to increased inflationary pressures around the world. Rystad Energy AS predicts that Brent could soar to an incredible $240 a barrel this summer if countries continue to impose sanctions on Russian oil imports.
“The extreme intraday volatility probably speaks to several things: the degree of uncertainty, the nature of the news flow, the spillover of some chaotic spot markets and relatively low levels of liquidity at some points,” said Paul Horsenell, head of commodities research at the Standard. Charter LLC
Prices
- Brent for May delivery added 0.7% to $110.09 a barrel at 14:10 London time.
- The global benchmark is down about 7% this week.
- West Texas Intermediate for April delivery rose 0.6% to $106.68.
The tightening of sanctions against Russia has raised fears that the already tight oil market could stretch even further, although OPEC emphasizes that there is no shortage of barrels. Banks such as Goldman Sachs Group Inc. have said that only reduced demand could stop the price rally.
Open interest in major oil futures contracts has fallen to a six-year low in recent days as traders turn away risk. Volatility skyrocketed and exchanges increased margins, effectively raising the cost of buying and selling. The price of Brent oil reached $139 per barrel and fell to $105 this week.
The UAE on Wednesday urged OPEC+ to ramp up production faster, though the country’s energy minister appeared to soften the message later. The cartel, of which Russia is a key member, has so far resisted calls from consumers to download more, arguing that price increases are due to geopolitical tensions rather than lack of supply.